FISCAL NOTE

Senate Bill 140 as introduced and as amended and reported by the Committee on Education Policy establishes the Parent’s Choice Program to establish and fund education savings accounts to cover qualifying educational expenses of participating students. This bill also creates the Parent’s Choice Program Trust Fund in which, funds appropriated by the Legislature from the Education Trust Fund, shall be deposited into the education savings account of each eligible student, on a yearly basis an amount equal to 100% of the Education Trust Fund’s (ETF) share of the prior year’s Foundation Program Fund as provided in Section 16-13-231(b)(2)g., Code of Alabama 1975. Based on the ETF’s share of the Foundation Program Fund for FY 2022 the amount of funds to be deposited into the education savings accounts of each student participating in the program for the 2022-2023 school year (fiscal year 2023) is $5,561. This bill limits participation in the program for the 2022-2023 school year, to: (1) students enrolled in and attending a public school; (2) home schooled students; and (3) children entering kindergarten for the first time. For the 2023-2024 school year, any eligible student, who is enrolled in and attending a nonpublic school and whose family has an adjusted gross income (AGI) up to 200% of the federal poverty level for the preceding tax year shall be allowed to participate in addition to the 2022-2023 participants. Beginning with the 2024-2025 school year, and each year thereafter, any student may apply, regardless of income. Based upon July 1, 2021, Census estimates, the estimated number of students (homeschool and non-public school) not currently counted in the FY 2022 Average Daily Membership that determines the cost of the Foundation Program, is approximately 96,615. Using the FY 2022 per student amount of $5,561, FY 2022 Foundation Program’s ETF share, and assuming full participation in school year 2024-2025 (fiscal year 2025), the estimated maximum cost to the Education Trust Fund to fund education savings accounts for nonpublic and home school students is an estimated $537 million annually. However, the net impact to the Education Trust Fund would be dependent on: (1) the degree to which Average Daily Membership declines as students leave public schools to attend nonpublic schools; (2) the degree to which the Legislature make adjustments to components of the Foundation Program; (3) the degree to which appropriations to the Parent’s Choice Program Trust Fund to be deposited into education savings accounts and to the Parent’s Choice Program Expense Fund for increases resulting from an increase in the number of students becoming eligible to participate in the program.

This bill further provides that participating public school students enrolled part-time in a participating public school shall not be included within the number of students in average daily memberships used to determine the cost of the Foundation Program. In addition, the bill provides that participation and receipt of scholarship funds pursuant to the Alabama Accountability Act of 2013, Chapter 6D, Title 16, Code of Alabama 1975, is supplemental to the receipt of education savings account funds of a participating student.

Further, this bill provides that in the event the amount of ETF funds appropriated to the Parent's Choice Program Trust Fund, in any fiscal year, are insufficient to fully fund all participating students, the Treasurer shall prorate all funds on a per capita basis among all students. The bill provides that funds deposited into an education savings account do not constitute taxable income. Further, this bill provides that if, under certain conditions, deposits into an education savings account are halted, resulting in the board closing the education savings account, any monies remaining in the account shall be returned to the state. This bill further provides that any unexpended funds shall be reappropriated annually.

This bill creates the seven-member Parent’s Choice Board, chaired by the State Treasurer, to administer the program and provides that members of the Board shall not be compensated, but shall be reimbursed for all reasonable and necessary expenses in the same manner as state employees. The bill further provides that expenses of the Board will be paid from the newly created Parent's Choice Program Expense Fund which shall be partially funded by the newly created Parent's Choice Program Trust Fund, in an amount not to exceed 5% of the Trust Fund to cover annual administrative costs of the program. This bill will further increase the obligations of the Education Trust Fund by an undetermined amount in the event that the number of participating students increases significantly in any fiscal year and, the Treasurer has to request an appropriation from the Legislature to the Parent's Choice Program Expense Fund to cover the increased administrative costs. In addition, the bill allows the Treasurer to accept gifts and grants from any source to cover administrative costs and allows unexpended funds to be reappropriated annually.

This bill provides that the program shall be operational no later than July 1, 2022.

Further, the bill requires the board to implement a commercially viable, cost effective, and parent friendly portal for: (1) payment for services from education savings accounts to participating schools or education service providers; and (2) publicly rating, reviewing, and sharing information about participating schools and education service providers.

In addition, this bill allows local boards of education to: (1) charge tuition to participating students that enroll from outside the student’s resident school district; (2) request additional funds from a parent to cover ordinary student costs related to attendance at a participating school; (3) refuse to provide educational services to a participating student who resides outside of the school district; and (4) establish a policy to provide educational services to nonresident students under certain conditions, including payment of reasonable fees for attendance. This bill further requires the resident school district, in which a participating student was last enrolled to provide an education service provider that has enrolled the student with a complete copy of the school records of the student.

In addition, this bill increases the administrative obligations of the State Department of Education to: (1) adopt rules, in consultation with the Board, to establish a process for students who opt to stop receiving payments into an education savings account and return to public school and for students who wish to receive some services provided by a public school; (2) provide verification to the Board regarding public school students with education savings accounts; and (3) ensure that public schools and school districts providing services to a participating student receive the appropriate pro rata share of the students education savings account based on the percentage of total instruction provided to the student.